How are key risk indicators different from key control indicators?

At a fundamental level, key performance indicators (KPIs) measure the degree to which the objective is met, while key risk indicators (KRIs) measure changes in exposure to risk. Key Control Indicators (KCIs) measure the performance of a control in reducing the causes, consequences, or likelihood of a risk. Another of the most used indicators in corporate governance are KPIs or key performance indicators. While KRI is used to indicate possible risks, KPIs measure performance.

While many organizations use them interchangeably, it is necessary to distinguish between the two. KPIs are often designed to provide a high-level overview of organizational performance. Therefore, while these metrics may not adequately provide early warning signs of a developing risk, they are important for analyzing trends and monitoring performance. Because they provide useful information about the possible risks that may affect the organization's achievements and objectives, KRIs are informative and act as catalysts for decision-making.

By being very clear about the type of question you are trying to answer and the type of indicators you are defining, you can significantly improve the quality and clarity of the resulting management information. If the organization already uses a risk management system, it has its risk assessment and control data, the emission data and can effectively combine existing KRIs. Key performance indicators (KPIs) are the indicators and measures that an organization uses to understand the performance of people, business units, projects and companies in relation to their strategic objectives. While many organizations use the terms key performance indicators (KPIs) and key risk indicators (KRI) interchangeably, they are actually two different tools for different purposes.

To properly balance risks and opportunities and obtain the best possible alignment between performance management and risk management, each KRI must be linked to a KPI. Allocating key risks to key strategic initiatives allows management to identify the most critical metrics and monitor their performance. Once the organization has identified its strategic objectives, KPIs serve as monitoring and decision-making tools that help answer key questions about the organization's performance. Metrics of causes, consequences and risks can be tracked, and can be easily accessed by staff who study them within the organization.

Sometimes, they represent key indices that management can track as indicators of the evolution of risks and potential opportunities, indicating the need to act. They monitor changes in levels of exposure to risk and contribute to generating the first warning signs that allow organizations to report risks, prevent crises and mitigate them in time. Google the terms “Key Performance Indicators”, “Key Risk Indicators” and “Key Control Indicators” and you'll accumulate 13,900,000, 7,180,000 and 9,400,000 views, respectively. Leave your name and email address below if you want to see how StratexPoint can help you manage your key indicators.

Once established, you can define thresholds (such as green, amber and red), which represent rising and descending indicators, both critical and non-critical. KRIs, independently or together with other data related to the risk environment, such as loss events, evaluation results and problems, provide significant information on the weaknesses of risk and control environments. By measuring risks and their potential impact on business performance, organizations can create early warning systems that allow them to monitor, manage and mitigate key risks.